Alsup Company Had the Following Transactions During the Fiscal Year

question 45

Multiple Choice

Alsup Company had the following transactions during the fiscal year ended December 31, Year 4.
·Accounts receivable decreased from $115,000 on December 31, Year 3, to $100,000
On December 31, Year 4.
·Alsup's Board of Directors declared dividends on December 31, Year 4, of $.05
Per share on the 2.8 million shares outstanding, payable to shareholders of record
On January 31, Year 5.The company did not declare or pay dividends for fiscal year,
Year 3.
·Sold a truck with a net book value of $7,000 for $5,000 cash, reporting a loss of $2,000.
·Paid interest to bondholders of $780,000.
·Cash increased from $106,000 on December 31, Year 3, to $284,000 on December 31, Year 4.
(CMA Dec 95 #3) Refer to the Alsup Company example.Alsup Company uses the indirect method to prepare its Year 4 statement of cash flows, and would show a(n)

• A)source or inflow of funds of $5,000 from the sale of the truck in the financing section.
• B)deduction of $15,000 in the Operating Section, representing the decrease in year-end accounts receivable.
• C)source or inflow of funds of $7,000 from the sale of the truck in the financing section.
• D)addition of $2,000 in the Operating Section for the $2,000 loss on the sale of the truck.
• E)deduction of $2,000 in the Operating Section for the $2,000 loss on the sale of the truck.

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